Despite rising interest rates, America’s housing sector is enjoying a renaissance this summer.
According to the Commerce Department, sales of new homes rose 8.3 percent in June to a seasonally adjusted annual rate of 497,000. That’s a five-year high and, if realized, would be the largest annual gain in two decades.
The National Association of Realtors, however, reports that sales in the far larger market of PREVIOUSLY OCCUPIED homes fell 1.2 percent in June to an annual rate of just over 5 million. Still, sales have surged more than 15 percent over the past year and, despite the dip, June’s numbers were just below the 3½ year high set in May.
But some analysts are concerned that rising interest rates could hamper sales in the months ahead. The national average fixed rate for a 30-year mortgage jumped to nearly 4.5 percent at the end of June.
And the government reported late this week that orders for big-ticket durable goods rose 4.2 percent last month due, largely, to strong demand for commercial aircraft.
The manufacturing sector has struggled in 2013, as a weaker global economy slowed demand. U.S. agricultural exports, on the other hand, are forecast to increase nearly 3 percent this year to a record $139.5 billion.
Secretary of Agriculture Tom Vilsack returned this week to his home state of Iowa, where he spoke to producers on the impact of gridlock in Washington. But Vilsack took a backseat to the weatherman. Paul Yeager attended the economic summit and filed this report.
USDA chief Tom Vilsack headlined the Iowa Farm Bureau’s Economic Summit, which was organized to help producers manage risk.
Vilsack spent much of his time addressing the audience but also found time to send a message to those back in Washington.
Vilsack chided the House version of the Farm Bill as it contained no language for food assistance programs. And the secretary said another renewal of the current bill, an option if a new bill isn’t passed by October, is a step backwards.
Secretary Tom Vilsack/ USDA: “Honestly, an extension removes an impetus for getting a Farm Bill done and the challenge and the risk of not getting it done this year is that you’re not likely to get it done in an election year, as we saw in 2012. You don’t get it done in election year then you have a new congress that begins in 2015 and you start the process over again and the chances of getting it done in the latter part of the second term of a president (are) equally problematic, so if we don’t get it done now, the chances are that we won’t get it done.”
With so much uncertainty surrounding policy, producers also heard about another factor beyond their control – the weather.
Elwynn Taylor is Iowa State University’s Extension Climatologist. His review of this year’s weather data, included a cool, wet spring, record snowfall in May, followed by triple digit temperatures less than two weeks later. Despite the extremes, Taylor found a parallel.
Elwynn Taylor, Iowa State University Extension Climatologist: “From October 1st, right up until this week, it could have been a carbon copy, the weather of 1947, the 4th worst year for crop producing in the history of state of Iowa.”
Not exactly welcome words to producers coming off the worst drought in a half a century just last year.
1983 was another year like 1947 when delayed planting quickly gave way to a hot and dry summer.
Elwynn Taylor, Iowa State University Extension Climatologist: “A disaster to the crop, because the crops because they were not properly rooted. They suffered more from the hot/dry than if they would have had a normal root system.”
The shortened spring season forced some producers to rush field work before the soil was fully ready for heavy equipment. But some farmers had few options, as the ideal planting window, passed by on the calendar with little progress. According to Taylor, the more compacted soil proved to be a major hurdle for the corn’s root system. And that could be a problem from pollination through the harvest.
Elwynn Taylor, Iowa State University Extension Climatologist: “As soon as corn has pollinated, it only has one interest, if plants can have an interest, and that’s to produce a viable seed. As soon as grain is about to start developing, the plant doesn’t grow roots anymore. If it hasn’t gotten roots where they belong, it is not going to get there. The emphasis on roots has gone away.”
Thus, according to Taylor, the crops will need at minimum average moisture to have an improved chance at producing trendline yields.
However, drought conditions are beginning to return to the Corn Belt as indicated in this week’s Drought Monitor from the University of Nebraska. 58.3 percent of the contiguous U.S., is in some form of drought. That’s a four point increase over last week and ten point spike since June 11 when the lowest level in 18 months was recorded.
Elwynn Taylor, Iowa State University Extension Climatologist: “The drought is likely to persist in the west and have below trend yields. Temperature highs and lows will be significant, if we go back into warm nights, starting now, we could go back to the same disaster path we were on in 1947 and 1983. If we stay cool, cooler than usual, we will be above trend for the 160 bushels. Climate will likely be increasingly erratic during the coming 25 years.”
But does Taylor call this climate change?
Elwynn Taylor, Iowa State University Extension Climatologist: “Congress is the Camelot of the world, not only did they define drought for us, but by law, for more than 9 years. After 9 years it isn’t a drought any more. After 9 years it’s a new climate.”
For Market to Market, I’m Paul Yeager.